DeepWater Desal plan gets a boost from Monterey Peninsula water district

Seeking a fallback plan in case California American Water's water supply project falters, the Monterey Peninsula Water Management District will help provide funding for a proposed Moss Landing desalination plant.

By a 5-1 vote, the water management district's board approved an agreement with DeepWater Desal to split the estimated $1.6 million cost of environmental review and permitting in exchange for a purchase option. That involves the facilities included in an initial phase of the project upon completion of preliminary design work.

The district plans to tap up to $800,000 from its recently approved water supply charge for the work, which is expected to take up to two years. DeepWater Desal is also required to meet certain project milestones.

Director Judi Lehman cast the dissenting vote.

Water district general manager Dave Stoldt said the agreement positions the district to pursue a potentially viable alternative water source if Cal Am's proposed desal plant north of Marina is delayed. It is designed to accelerate the process so the district can determine if DeepWater can attain environmental certification.

"It's a small investment to move an alternative forward," Stoldt said. "The onus is still on (DeepWater Desal) to execute."

District officials decided to pursue an alternative project last year because of the potential for litigation over Cal Am's plan to draw feeder water from the Salinas Valley groundwater basin. They authorized spending up to $500,000 during two years on the pursuit and issued a request for proposals early this year. In March, the board chose the DeepWater Desal proposal over one submitted by Peninsula developer Nader Agha.

DeepWater Desal, led by Brent Constantz, has proposed a plant capable of delivering up to 10,000 acre-feet of potable water per year initially. Stoldt said the water district would need about 3,500 acre-feet per year less than that if a groundwater replenishment project is ready to go.

The DeepWater firm has begun preliminary environmental review work with the state Lands Commission as lead agency under the state Environmental Quality Act.

The DeepWater Desal proposal, dubbed the Central Coast Regional Water Project, calls for subsequent expansion capable of providing up to 25,000 acre-feet of water per year for regional needs. The firm has a five-year exclusive negotiating agreement with the Dynegy power plant at Moss Landing for land and improvements. Plans call for a digital data storage center there and the purchase of cheap power through a municipal power utility to be established by the city of Salinas.

Attorney David Balch, who represents Agha's project, urged the water district board not to approve the agreement. He argued it would be illegal for the district to commit support before an environmental review is finished. Balch argued the district shouldn't use revenue from its water supply charge because it is being challenged in court.

Stoldt said district lawyers assured the board the agreement was legally defensible and that, even if the water supply charge is overturned, the district would not have to reimburse money already collected.

He said the district is not committing to finance or approve the DeepWater Desal project, and argued "preliminary work to identify alternatives happens all the time."

Cal Am officials have made it clear, Stoldt said, they will not pursue alternative projects unless the company's main desalination proposal is proved to be infeasible. Stoldt argued the district owed it to constituents to pursue viable backup plans.

He said a backup plan could avoid the spectre of rationing and fines that could be imposed on the region for violating a state-ordered cutback in pumping from the Carmel River that takes full effect at the start of 2017.

"This is a very high-stakes game," Stoldt said.

Cal Am spokeswoman Catherine Bowie said company officials believe their proposal is the "best path forward and furthering its advancement is where everyone's energies should be concentrated." Bowie said project contingency plans contained in a proposed settlement agreement with the water district and others are believed to be sufficient in case of "failure or delay."

She said company officials are grateful for the water district's support on aspects of the Cal Am proposal, including efforts to lower project costs, and believe the best way to proceed is for all agencies to work together to advance a single project.

Carmel Mayor Jason Burnett, vice president of the Peninsula mayors' water authority, said he trusted that the water district's decision would comply with the proposed settlement agreement. Burnett said the water authority believes the settlement agreement provides "robust contingency options" for high-risk elements, including alternative feeder water intake, brine discharge and plant sites.